-When a fixed cost is added to both high-quality _____ and low-quality _____, the relative price of high-quality _____ will decrease, relatively more high-quality _____ will thus be consumed.
-Proportion of high-quality _____ will increase.
-The average quality of _____ will improve/increase.
Refer to the following taxi fare arrangement.
Original fare (whole day)
First 2 kilometers $30
Every subsequent 200 meters $2
Suppose a late-night surcharge of $20 will be added to the original fare on any taxi trips from 1:00 am to 5:59 am. How will this surcharge affect the average travel distance of taxi passengers during late-night? Explain. (4 marks)
When a fixed lump-sum charge is added on a good, the relative price of the long-distance trips will decrease but the relative price of the short-distance trips will increase. The quantity demanded of long-distance trips will relatively increase while that of short-distance trips will relatively decrease, so the proportion of long-distance trips will increase. The average distance traveled increases. (4)
DSE Econ 文章系列
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- 國民收入決定及價格水平 National income determination and price level
- 貨幣與銀行 Money and Banking
- 宏觀經濟問題和政策 Macroeconomic Problems and policies
- 國際貿易和金融 International Trade and Finance